Top investment picks from Nirmal Bang Retail Research for Diwali 2017

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It was not the beginning which investors or traders expected to be for Samvat 2074. The Nifty and the Sensex saw the biggest fall in recent years during the auspicious Muhurat trading day with the Nifty50 falling 64.30 points or 0.63 percent while the Sensex dipped 0.6 percent or 194.39 points. Bank Nifty was the biggest lower, down 1.25 percent led by ICICI Bank and Kotak Mahindra Bank.

Research and broking firm Nirmal Bang Retail Research has come out with investment picks for Diwali 2017 which can give good returns.

Control Print Ltd. CMP: Rs. 382 | Target Price: Rs. 490

According to Nirmal Bang, Control Print with 18 percent domestic market share is estimated at Rs 10,000-11,000 million as of FY17 and is currently growing at CAGR of 12-15 percent. New product launches coupled with a marketing push is expected to benefit overall growth for CPL going ahead. New product launches would help the company to increase its installations thus benefitting the revenues from consumables and servicing, it said.

Minda Corporation Ltd. CMP: Rs. 144 | Target Price: Rs. 180

Nirmal Bang feels that Minda Corporation has set up die casting plant which will take the total capacity from 4,600 MT per annum to 9,600 MT per annum by FY20. The facility is expected to be operational in FY18 and annual sales from this plant is expected at Rs 200 crore by FY20. The sensor business going ahead will expand as the number of sensors going up per vehicle once BS-VI norms becomes effective. This will substantially add to the company’s revenue. The firm expects the EBITDA margins to improve from 6.7 percent in FY17 to 10.5 percent in FY19E mainly driven by the successful turnaround on Minda Furukawa JV. The stock looks attractive at current valuations given the future dynamics of the business.

Rane (Madras) Ltd. CMP: Rs. 504 | Target Price: Rs. 810

The broking firm expects Rane debt to come down by Rs 125 crore in next two years and expects it to do sales Rs 1345 crore and Rs 1525 crore, EBITDA of Rs 125 crore and Rs 159 crore and PAT of Rs 28crore and Rs 54 crore in FY18 and FY19 respectively. Higher growth in PAT is on account decline in interest cost. At current price the share is trading at 11.5x PE FY19 EPS of Rs 44, it added.

S Chand and Company ltd. CMP: Rs. 464 | Target Price: Rs. 630

Nirmal Bang feels that the management expects a growth of 14–15 percent YoY in FY18E & FY19E organically. S Chand is also looking out for inorganic growth mainly in western and southern India. It expect margins to remain stable mainly due to impact of GST on authors. ROCE stands at around 7 percent in FY17 which is low on account of of goodwill, acquisition, and investment in digital which is likely to improve. As per the house's estimates, it expects company EPS of Rs 35 in FY19E . At CMP, the share is trading at EV/Ebitda of 5.8x and PE of 13.2x FY19E EPS.

Shemaroo Entertainment Ltd. CMP: Rs. 400 | Target Price: Rs. 485

The research firm expects the company’s sales to grow by 11.2 percent in FY18E and 11.8 percent in FY19E and expects operating margins to improve by 186 bps in FY18E & 150 bps in FY19E and inch to 31.8 percent and 33.3 percent respectively. With 3585 titles on books, Nirmal Bang expects major capex phase for the company is over and will slowdown in coming years. Higher profit with low capex will generate positive FCFF which we believe to come in at Rs 52.5 crore in FY19E from a negative of Rs 81.1 crore in FY17.

Tata Global Beverages ltd. CMP: Rs. 210 | Target Price: Rs. 260

The stock has underperformed the broader markets for long time however the management is bringing back focus into portfolio of business. Hence, given the restructuring activities taken by the company and improving business prospects the stock is likely to catch up the valuation gap with other consumer players. At CMP the stock is trading at 24.7x FY19E as compared to 35.4x Dabur and 44.6x Britannia, Nirmal Bang added.